Statutory pay is a crucial aspect of payroll compliance in the UK, yet it is often overlooked or misunderstood by both employers and employees. Whether you run a small business or are part of a larger organisation, understanding your legal obligations—and entitlements—is essential. Statutory pay refers to the minimum payments set by law that employers must provide to eligible employees during specific periods away from work, such as illness, maternity, paternity, or adoption leave.
There are five primary types of statutory pay, each with its own criteria, calculation methods, and common pitfalls. These include Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Shared Parental Pay (ShPP), and Statutory Adoption Pay (SAP). While the regulations are set by HMRC, the administration of these payments requires careful attention to detail, appropriate record-keeping, and up-to-date knowledge of the latest guidance.
Statutory Sick Pay (SSP) is perhaps the most familiar. It provides eligible employees with £116.75 per week for up to 28 weeks. To qualify, an employee must have been off sick for at least four consecutive days (including weekends), earn a minimum of £123 per week before tax, and be classed as an employee. Employers must ensure proper documentation is collected, including self-certification for the first seven days of absence and a fit note from a GP thereafter.
Statutory Maternity Pay (SMP) provides support to employees taking time off to have a baby. It consists of 90% of the employee’s average weekly earnings for the first six weeks, followed by £187.18 per week (or 90% of earnings if lower) for the next 33 weeks. Small businesses may be able to reclaim up to 103% of this cost through Small Employers’ Relief, making proper administration especially important.
Statutory Paternity Pay (SPP) offers up to two weeks’ pay at £187.18 per week for eligible fathers or partners. Though this represents a significant income drop for many, it is a right that should not be overlooked. Like SMP, employers must check eligibility and maintain accurate records to avoid issues.
Shared Parental Pay (ShPP) allows parents to share both the leave and the pay associated with having a child. The pay mirrors the rates of SMP and SPP after the initial six weeks. While it offers flexibility for families, it is administratively complex and requires close coordination between the employee, employer, and HMRC guidelines.
Statutory Adoption Pay (SAP) functions in much the same way as SMP but applies to adoptive parents. It recognises the equal importance of support during adoption and follows the same rate and duration as maternity leave.
One of the most common mistakes employers make is assuming that annual leave does not accrue during statutory leave. This is incorrect. Employees continue to accrue their holiday entitlement during maternity, paternity, adoption, or sick leave. For example, an employee on a year-long maternity leave will still be entitled to a minimum of 28 days of holiday, which must be honoured either through paid time off or a lump sum if their employment ends. This is a liability that must be accounted for in workforce and financial planning.
Other frequent errors include misclassifying workers (e.g., treating employees as contractors), failing to conduct proper eligibility checks, inadequate record-keeping, and overlooking the opportunity to reclaim eligible statutory payments. These mistakes can lead to HMRC penalties, employee grievances, and unexpected payroll costs.
To manage statutory pay effectively, it is strongly recommended that businesses invest in HMRC-compliant payroll software that automates calculations and ensures compliance with current legislation. Maintaining thorough documentation—including fit notes, correspondence with employees, payroll records, and relevant forms—is essential. In addition, employers should keep up to date with the latest HMRC updates, which are often communicated via free online webinars and bulletins.
When uncertainty arises, consulting with your accountant or payroll professional is the most reliable way to ensure compliance and avoid costly errors. The complexity of payroll regulations should not be underestimated, but with the right systems and support in place, it is entirely manageable.
To learn more, listen to our recent episode of the FFS Podcast where we discuss statutory pay in detail.
Alphabet Soup for Employers: SSP, SMP, SHPP, and More - For Finances Sake (FFS) | Podcast on Spotify
At Chadwick Accountants, we work with SMEs across Warwickshire and the Midlands to help them understand and implement payroll best practices, including statutory pay. If you have questions or concerns about your payroll obligations, we’re here to support you.
For further advice or to speak to one of our payroll specialists, please email us at [email protected]
